What is Musharakah?
Musharakah is one of the basic concepts of Islamic finance. It means "partnership" or "sharing": two or more parties contribute capital to a venture and share profits and losses according to agreed terms.
It differs from a conventional interest-based deposit:
- With interest, the return is a rate agreed in advance, independent of any underlying business activity
- With Musharakah, the return comes from real economic activity and depends on its results
How pv.direct participation relates to it
- Participants contribute capital for a share of a documented solar installation
- The installation is placed on a factory rooftop; planning and installation are carried out by LEIT's engineering team
- The factory buys the electricity at a contracted rate below its grid tariff, under its own electricity contract
- Participants receive their share of the electricity revenue actually paid — projected annual distribution range, not guaranteed
- Whether the electricity price changes when grid tariffs change depends on the project contract — it is not automatic
The factory's savings under its electricity contract and the participants' distributions are separate matters, with different contracts and risks.
pv.direct participation is designed to align with Sharia principles (e.g. Musharakah-style participation in a real asset). Obtain your own advice or certification if required.
Key features
- Real asset: a share in solar panels, inverters and cables that physically exist
- Real economic activity: generation and sale of electricity
- Performance-based distributions: no fixed rate; distributions depend on production and payment
- Shared risk: distributions can be lower than projected, and the annual capital deduction applies on exit (e.g. 0.5% per year, as set in the contract)
Musharakah-style participation and conventional interest
| Aspect | Musharakah-style participation (pv.direct) | Conventional interest (bank certificates) |
|---|---|---|
| Source of return | Sale of electricity | Interest on deposited money |
| Asset ownership | Share in a solar installation | No |
| Fixed rate | No — depends on performance | Rate set by the bank in the certificate terms |
| Sharia | Designed to align with Sharia principles — obtain your own advice | Interest-based; views differ — obtain your own advice |
Conclusion
Musharakah describes partnership in a real venture with shared outcomes. pv.direct participation is designed along these principles — with a real asset and distributions from electricity revenue actually paid. That does not make any return certain, and Sharia assessments can differ; obtain your own advice or certification if required.
Important: Projected figures are illustrative only — not guaranteed. Returns depend on energy production, customer payment, costs, contract terms and market conditions. This article is general information, not investment or religious advice.